Yatra's big marketing spend leads to more direct and unpaid traffic

Nasdaq-listed Indian OTA Yatra has revealed the extent to which marketing costs are driving the landgrab for customers in the country, with its Q1 spend on this line up by nearly 250% compared with the same quarter last year.

Its Q1 earnings released last week showed marketing and sales promotion costs for the April-June quarter of INR1.2 billion ($19 million), almost 250% up on the same quarter last time. It said that a lot of the additional spend was a result of TV and print activity around its appointment of "Bollywood superstar" Ranbir Kapoor as its brand ambassador.

In prepared remarks Yatra CEO Dhruv Shringi noted that "this campaign [which only started mid-May] lead to a 67% increase YoY in the quarter in direct and unpaid traffic."

While the 250% growth in marketing costs appears extreme, in cash terms it is still underspending India's other Nasdaq-listed OTA, MakeMyTrip, which recorded sales and marketing costs for the same period of $133.5m, in itself a 150% increase year-on-year although the numbers also include Ibibo Group.

Operationally, Yatra has grown the business across all its metrics. It booked nearly 1.9 million air passengers (up some 15%), nearly half a million standalone room nights (up 70%) and 54,000 packages (up 13%).

Its net revenue margin from air tickets was flat at 6.1% while the figure for hotels and packages was up to 13% from 10.9%.

Gross bookings for the quarter came in at $320 million, up by 24%. MakeMyTrip in the same period took just over a billion dollars.

And like MakeMyTrip, Yatra has ended the quarter in the red. "As per IFS", Yatra losses came in at just over $48 million compared with MakeMyTrip's $68 million.

After the period ended, Yatra announced that it was making a big push into the corporate market in India, buying Air Travel Bureau for what was an undisclosed sum at the time. The Q1 earnings show that this deal will cost Yatra between $22.5-$27.5 million.

Shringi said: "The combination of Yatra’s existing corporate travel business and ATB’s business, we believe, makes us the largest corporate travel platform in India by gross bookings, servicing over 650 of some of India’s largest corporations."